Tiger Airways

Heard Citi and JP Morgan initiated coverage on this babe. Anybody got the report?

Asia’s True Ryanair: Morgan Stanley Initiate with Overweight: Our 12-month price target is S$1.77, based on our F2010E P/E of 13.5x. As those seeking to emulate a Ryanair share investment strategy with Tiger shares are likely long-term investors, we highlight 43% potential upside for Tiger’s share price to S$2.10 in two years, based on our F2011E P/E of 12x. We like the Tiger franchise for five reasons: • Highest-quality low-cost airline franchise: Prudent and conservative accounting adopted to recognize revenues and profit. • Impressive market growth opportunities: We see growth opportunities for low-cost airlines with an estimated 15-20% increase in passenger numbers for the next five years. • Disciplined execution of low-cost strategy: Tiger persistently strives to cut costs and focus on short-haul flights for sustainable route profitability. • High-quality strategic shareholders: The company’s four major shareholders complement each other in individual expertise and provide checks and balances to ensure Tiger adheres to its low-cost business model. • The Ryanair of Asia: Tiger has stayed true to the low-cost business model established by Ryanair. Key risk: Unusually high oil prices that the carrier is unable to pass through in fuel surcharges, or recover through higher ancillary revenues.

Citi -- Initiate at Buy: Ready to Roar TP S$2.00; 36% upside — We believe Tiger offers investors pure-play exposure into i) the structural Asian LCC growth story; ii) a potential Australian LCC industry shake-up. With one of the leanest cost bases globally, a sound expansion strategy and strong shareholder pedigree, Tiger is well poised to stimulate LCC demand as well as enlarge market share. We initiate at Buy/High Risk; TP S$2 (36% ETR). Immense opportunities in Asian LCC space — 1) Healthy long-term GDP growth leading to higher penetration rates; 2) increasing liberalization; 3) government focus on aviation infrastructure to reap the benefits of higher visitor arrivals. Within the Australian LCC space, growth is relatively more muted vs. Asia; however, incumbents have higher cost structures so carriers with low cost bases and strong balance sheets may establish a firm foothold in the market and gain market share. Inherent positives in Tiger’s business model — Relentless, disciplined cost focus has enabled Tiger to achieve one of the leanest cost structures among global airlines. Expansion involves passing on cost savings to passengers through lower airfares, enlarging the market and winning market share through an aggressive, yet sensible, pricing strategy. Strong shareholder pedigree provides extra comfort. Valuation premium justified by superior growth — We use an FY-Mar-11E Adjusted EV/EBITDAR of 10x to value Tiger – higher than the current Global LCC multiple of 6-9x – as Tiger’s FY10-12E EBITDAR CAGR of 49% significantly exceeds the peer range of 19-40%, driven by: 1) Tiger’s aggressive network expansion; 2) better yields on route maturity and shorter sector length; 3) continued cost reduction as Tiger moves toward asset ownership and further improves cost/scale efficiencies.

DBS Research is initiating coverage on Tiger Airways with a Buy recommendation and target price of S$ 2.10, which gives a potential upside of 30%. Tiger Airways turned around convincingly in 3Q10 with an operating margin of 17%, operating at load factors of almost 88% in 3Q10. Going forward, the airline will take delivery of 7 aircraft each in FY11 and FY12, which should help core net earnings almost triple from S$32m in FY10 to S$90m in FY12. Tiger Airways is a disciplined low-fare low-cost model with proven track record. This enables it to gain market share not only in the fast growing Asia-Pacific budget aviation market, but also in the more stagnant Australian domestic market. We believe the company has the potential to exponentially grow its business over the long-term.